Brokerage Views On Budget: Morgan Stanley, JPMorgan, Jefferies And More

Brokerages have shared their views on Union Budget 2024–25, which announced major changes to the capital gains tax. Finance Minister Nirmala Sitharaman also announced a reduction in the fiscal-deficit target from 5.1% to 4.9%. Bajaj Finance Ltd. is on the radar Bernstein Research and Morgan Stanley after it posted a 14% rise in net profit.

NDTV Profit tracks what the brokerages are putting out on stocks and sectors. Here are all the top calls from analysts that you need to know about on Wednesday.

Morgan Stanley On Budget

An increase in formal employment paves the way for sustained growth momentum in the near future.
Pegged a faster-than-expected reduction of the fiscal deficit in fiscal 2025.
Increased fiscal headroom is utilised to enhance job creation, skill enhancement, narrow the fiscal deficit, and maintain capex growth.
Announced the simplification of tax codes.
The lower-than-expected fiscal deficit will aid in the in the crowding in of private capex and loans.
The increase in capital gains tax for equities is contrary to our expectations.
We remain constructive on Indian equities, with a bias for large caps over small and mid-caps.
'⁠Overweight' on financials, consumer discretionary, industrials, and technology, and 'underweight' on other sectors.

Also Read: Budget 2024: STT Hike On F&O To Hurt Traders, But Retailers Won't Be The Worst Hit

JPMorgan On Budget

Although the capital gains tax was a surprise, investors quickly bought the market dip.
⁠Tweaks in income tax slabs and deductions to support consumption.
Micro, small, and medium enterprises push largely towards ‘Viksit Bharat’.
A reduction in tax and the removal of indexation benefits on properties will have a negative impact.
However, tax benefits on the reinvestment of gains still remain.
Therefore, the impact on the market should not be high.
Duty cut to support jewellery demand.
Long-term positioning indicates investors caution for potential volatility.

Also Read: Nirmala Sitharaman Adds Glitter To Jewellery Market Ahead Of Festive Season

Jefferies On Budget

Capital expenditure growth is maintained, and the reduction of the fiscal deficit is a clear positive.
An increase in capital gains tax and a cut in gold import duties will affect domestic capital formation.
incremental job support to support consumption.
Rotation into large cap laggards remains positive.
ITC Ltd. is positive with no change in tobacco taxation.
Gold financiers negatively impacted the reduction in gold prices due to a markdown in asset value.
⁠Cut in mobile phone duty negative for Dixon Technologies (India) Ltd.
The outlay for defence, road, and rail is similar to the interim budget.

Nomura On Budget

Do not expect an effect on corporate earnings.
The Nifty target for December is 24,860.
Withdrawal of indexation benefits could affect property demand.
Employment scheme to have a positive effect in the near term.
Positive on financials, infra, capital goods, cement, telecom, and power.
Cautious on consumption and metals.
Neutral on IT and healthcare sectors.

Also Read: Stock Market Today: Nifty, Sensex Log Worst Losing Streak In Over A Month As Financial Stocks Drag

Bernstein On Bajaj Finance

Downgrades the stock to 'underperform' rating with a target price of Rs 5,700 apiece, implying a potential downside of 15% from the previous close.
Expects a slower system-wide retail-credit growth.
Bajaj Finance's non-mortgage portfolio with yield over 13% is approximately 40% the size of the entire banking.
Very significant scale to limit outperformance versus a slowing segment growth.
Expects lower growth or profitability versus the company's targets.
Increase in loan losses seen in this quarter’s results.
Factors higher credit costs.
Newer segments pose greater challenges.
Premium valuation: room for significant multiple contraction.

Morgan Stanley On Bajaj Finance

Net credit costs came at the higher end of guidance.
Company indicated better collections in June and July.
Profit after tax was in line with its estimate.
Raises the credit-cost forecast for FY25 to 193 basis points from 185 basis points.
Trims PAT forecasts by 1.8% for FY25, 1% for FY26 and 0.7% for FY27.
Expects stock performance to be muted in the near term and improve in the second half of FY25.

Jefferies On ITC

Upgrades to a 'buy' rating on the stock and raises the target price of Rs 585 apiece, implying a potential upside of 25% from the previous close.
⁠ITC comes as a clear winner with the government leaving tobacco taxes unchanged.
GST also to remain stable till March 2026
Demand outlook is improving.
Modest price hike this year will set the base for next year.
ITC Ltd. well-placed to accelerate revenue growth through a blend of volume and price hikes and better mix.
⁠Input-cost inflation in the base in second half to support margin expansion.
Expects EBIT growth to accelerate from 4% YoY in second half of FY24 to 7% in first half of FY25.
⁠FMCG business to pick up with improving rural demand.
Expects ITC Ltd. to deliver a 10% CAGR on earnings per share.
ITC trades at 27x 1-year forward, lower than pre-Covid.
FMCG peers' discount at 50% is higher versus 40% pre-Covid.
Relative to Nifty, the stock trades at 29% premium versus 50% pre-Covid.

Citi On Hindustan Unilever

Reiterates a 'buy' rating on the stock and a target price of Rs 3,150 apiece, implying a potential upside of 31% from the previous close.
HUL reported a robust start to FY25 with 4% underlying volume growth in the first quarter.
Estimates low single-digit pricing growth by FY25 end.
Medium-term growth outlook remains strong with management.
Focus on premiumisation, fast-growing subcategories in beauty and channels of the future.
Believes that company’s self-help initiatives could drive a turnaround.

CLSA On India Property

Government lowered the long-term capital gains tax rate in the Union Budget 2024 to 12.5% versus 20% earlier.
Believes unlikely impact on end-users selling existing houses and reinvesting in new houses.
Sees impact on investors selling houses and reinvesting in other asset classes.
Negative for investors with a holding period below five years.
Moderate price appreciation (less than 10%).
Markets like Bengaluru, Hyderabad and Pune will be least-impacted.
Adverse impact expected in the NCR and Mumbai markets.
Pradhan Mantri Awas Yojana urban allocation for FY25 stood at Rs 30,170 crore.
Sobha Ltd., Prestige Estates Projects Ltd., Sunteck Realty Ltd., Godrej Properties Ltd. expected to benefit.

Investec On India Consumer Goods

Continues to expect a gradual consumption recovery.
ITC and Titan Co. are the main beneficiaries because of the status quo on cigarette taxes and ⁠sharp reduction in import duty on gold.
Unchanged cigarette taxation.
Spending related to the rural economy is very similar to the interim budget.
Higher spending in infrastructure, an indirect impact for FMCG.
Urban-middle-class boost through employment schemes and direct-tax reduction.
Extra neutral alcohol is out of the GST ambit, which aids costs for spirit companies.

UBS On Indian Economy Outlook

Narrowing fiscal deficit to 4.9% in FY25 remained on expected lines.
Overall allocations on agriculture, rural and youth employment appeared small.
Removal of indexation benefits may help make financial assets but hurt real estate.
Budget remained silent on further expansion on production-linked incentive schemes.
Government FY25 gross tax revenue growth estimate of 10.8% remained conservative.
Overall infra-allocation remained in-line with the past 10 years of infra spend.